The Commissioner of Taxation on February 28, 2025, issued a Decision Impact Statement regarding the Federal Court’s decision in Mylan Australia Holding Pty Ltd v Commissioner of Taxation (No 2) [2024] FCA 253 (March 20, 2024), in which the court held that the general anti-avoidance provisions (i.e., Part IVA of the Income Tax Assessment Act 1936) did not apply to deny the taxpayer interest deductions with respect to foreign related-party financing for the acquisition of a third party generic pharmaceutical business. Read TaxNewsFlash
The statement summarizes the Commissioner's views on the decision, including the following points:
- The decision does not disturb the Commissioner's view that, depending on the relevant facts and circumstances, Part IVA may apply to “debt push-down” schemes.
- The Commissioner’s abandoning its transfer pricing arguments in the case does not preclude it from pursuing a case that an interest rate is excessive as part of a case under Part IVA. The Commissioner “will consider on a case-by-case basis whether to pursue either, or both, a transfer pricing case and Part IVA case in challenging a debt push-down scheme. The considerations relevant to the application of the transfer pricing provisions in Subdivision 815-B of the Income Tax Assessment Act 1997 are economically based and invite different considerations to the analysis demanded by Part IVA.”
- The scheme in the decision pre-dates the introduction of ITAA 1936 s 177CB and was therefore determined under the “old” Part IVA. The “new” Part IVA, ITAA 1936 s 177CB(4)(b) requires the court to disregard the Australian tax implications of a counterfactual when determining the reasonableness of that counterfactual.
- The fact that a particular commercial transaction is chosen from a number of alternative courses of action because of the tax benefit associated with its adoption will not in and of itself mandate a finding of a dominant tax purpose. Rather whether a dominant tax purpose exists requires a close and careful examination of the facts.
For more information, contact a KPMG tax professional in Australia:
Kristie Schubert | kschubert3@kpmg.com.au
Julian Humphrey | jrhumphrey@kpmg.com.au
Stacey Hannam | shannam@kpmg.com.au
Keith Swan | keithswan@kpmg.com.au